The movers and shakers. The pioneers. The innovators. The early movers. The 3rd Annual Social Finance Awards!Read More ›
Social Return on Investment-Lessons Learned from the Field
Leaders of not-for-profits, social enterprises, and social purpose businesses often ask “how can we demonstrate the value of our work?” While there is no right answer, one technique, social return on investment (SROI), is gaining traction as a framework for demonstrating results. However, SROI is a relatively new field with few practitioners; hence, it can be challenging to draw from best practices or lessons learned. With that said, I’d like to shed some light on my experience with SROI and offer some “lessons learned” to aspiring and new practitioners.
Watch out for the garbage
I believe the saying I heard in Stats 101 was “garbage in….garbage out”. While this may be a rather crude way to express the importance of the quality of data collection, it strikes at the heart of an important issue – in order for the outcomes of an SROI analysis to be relevant, the data collected must be accurate and reliable.
Surveys need to be clear (to ensure the respondents understand what information is supposed to be provided), detailed (so sufficient information is gathered), but also concise (so that it respondents fill in the survey mindfully, or fill it in at all!). Finally, administering follow up surveys can be difficult and time consuming, so it is important to have a clear strategy from the outset for gathering this data.
To proxify or not to proxify? That is the question!
One of the key principles outlined in A Guide to Social Return on Investment (the handbook for SROI practitioners) is not to “over count”. While it is tempting to attach a financial proxy (or monetary value) to all outcomes, forcing this connection could jeopardize the credibility of the analysis.
With that said, if an outcome is considered important, but attaching a financial proxy is questionable, the outcome should be acknowledged and tracked. However, it should not be monetized and included in the SROI benefit to cost ratio. For example, if the stakeholders identify building friendships as a key outcome, this should be included in the outcome analysis, but it may be unrealistic to place a monetary value on this, and therefore should be omitted from the calculation for the benefit/cost ratio.
Limitations of the SROI Ratio
Following the example cited above, some outcomes cannot be monetized and incorporated into the SROI ratio. It is therefore necessary to remember that the ratio does not always provide the complete picture of the impact of an organization. As a result of this, the ratios should be viewed in the context of the organization and should not be used for comparative purposes.
For example, if Organization A has many outcomes that can be monetized (such as increases in employment and health outcomes) and Organization B has fewer outcomes that can be monetized, then the benefit cost ratio would likely be larger for Organization A. However, this does not imply that Organization A is better than Organization B, as Organization B may be achieving impressive results with respect to their key, yet non-monetized, outcomes.
With SROI projects, there is always the risk of extending the scope of analysis to a wide range of stakeholders, which I like to describe as “stakeholder creep”. This can be problematic because the wider the range of stakeholders and the further removed they are from the organization,the more difficult it becomes to connect the activities of the organization to the stakeholders. Thus, it is important to maintain a tight scope of analysis and limit “stakeholder creep”.
On a general note, undertaking a SROI analysis can be daunting as there are many steps involved, and the process is not straightforward. At the outset, you may find yourself overwhelmed by all the issues to consider while undertaking the analysis. This is understandable, because there are lots of moving parts to an SROI analysis. So, it is important to isolate the elements of each stage and address them methodically and carefully. By doing so, the pieces will come together, and the SROI framework will emerge.
I hope the lessons discussed above provide some insight into the world of SROI. As SROI is an emerging and evolving methodology, I am sure that many more lessons learned will come to light, and old ones may become obsolete. I look forward to sharing my insights, and learning from others, as SROI matures.
Photo credit: http://www.flickr.com/photos/pagedooley/2121472112/
Recommended for you
Community Development, Impact Measurement, Social Entrepreneurship, Social Finance Awards, Social Finance ToolsJared Walker Managing Editor, SocialFinance.ca
Bob Willard Speaker & Author of Resources for Sustainability Champions
We go back into the archives for a still-pertinent piece on why we need a better metric for improved quality of life and progress than GDPRead More ›
Seher Shafiq and Faye Simmonds
Two U of T grads look for “silver bullet” of impact measurement across a broad portfolio, discover the challenges to this elusive goal in the process.Read More ›